Cases & Investigations
B. Riley, Inc.
Type: Investigations
Stock Symbol: NASDAQ: RILY
Wolf Popper LLP is investigating potential claims on behalf of shareholders of B. Riley, Inc. (“B. Riley”) (NASDAQ: RILY) against B. Riley’s Board of Directors and members of its senior management concerning B. Riley’s relationship with Brian Kahn, Chief Executive Officer of Franchise Group, Inc. (“FRG”).
In May 2023, B. Riley entered into an agreement to assist Brian Kahn in leading a management buyout of FRG. The deal was completed in August 2023. On November 2, 2023, Kahn was implicated as an unnamed coconspirator in a conspiracy to defraud $294 million in funds from investors in Prophecy Asset Management. B. Riley has acknowledged that it had invested $281.1 million in the management buyout and had made a separate $201 million loan to Kahn’s investment firm secured by Kahn’s ownership interest in FRG common stock. According to The Wall Street Journal, combined, the stated value of the loan and the equity stake exceeds B. Riley’s shareholder equity. On February 22, 2024, B. Riley’s Board of Directors issued a press release reporting that its Audit Committee had hired “outside counsel at Sullivan & Cromwell LLP to conduct a thorough, internal review of Mr. Kahn’s dealings with B. Riley” and that the “review confirmed … that the Company and its executives … had no involvement with, or knowledge of, any of the alleged misconduct concerning Prophecy.” However, according to an earlier August 28, 2023 company press release, Sullivan & Cromwell had “served as legal counsel to B. Riley in connection with its investment in FRG and the credit facility.” At least one investor (albeit a short seller) has questioned the propriety of retaining Sullivan & Cromwell to review a transaction where it had served as counsel for B. Riley.
The revelation of these facts concerning B. Riley’s exposure to Kahn and FRG has resulted in B. Riley’s stock price plummeting from a high of $59.13 a share on July 26, 2023 to close on February 23, 2024 at $15.67 per share.
In May 2023, B. Riley entered into an agreement to assist Brian Kahn in leading a management buyout of FRG. The deal was completed in August 2023. On November 2, 2023, Kahn was implicated as an unnamed coconspirator in a conspiracy to defraud $294 million in funds from investors in Prophecy Asset Management. B. Riley has acknowledged that it had invested $281.1 million in the management buyout and had made a separate $201 million loan to Kahn’s investment firm secured by Kahn’s ownership interest in FRG common stock. According to The Wall Street Journal, combined, the stated value of the loan and the equity stake exceeds B. Riley’s shareholder equity. On February 22, 2024, B. Riley’s Board of Directors issued a press release reporting that its Audit Committee had hired “outside counsel at Sullivan & Cromwell LLP to conduct a thorough, internal review of Mr. Kahn’s dealings with B. Riley” and that the “review confirmed … that the Company and its executives … had no involvement with, or knowledge of, any of the alleged misconduct concerning Prophecy.” However, according to an earlier August 28, 2023 company press release, Sullivan & Cromwell had “served as legal counsel to B. Riley in connection with its investment in FRG and the credit facility.” At least one investor (albeit a short seller) has questioned the propriety of retaining Sullivan & Cromwell to review a transaction where it had served as counsel for B. Riley.
The revelation of these facts concerning B. Riley’s exposure to Kahn and FRG has resulted in B. Riley’s stock price plummeting from a high of $59.13 a share on July 26, 2023 to close on February 23, 2024 at $15.67 per share.
Contact Instructions
Phone: Adam Savett - (212) 451-9655
Email: Outreach@wolfpopper.com
Email: Outreach@wolfpopper.com